The Indian cabinet on Wednesday cleared state-run ONGC to acquire the government’s 51.1 percent in HPCL as New Delhi wants larger local oil firms to take on global rivals.

“When you go for overseas deals, you will get more leverage because of the size of the group,” Surana told Reuters, adding the deals should also make ‘economic and commercial sense’.

“Overall we will get the backing of bigger group.”

HPCL has in the past tried to enter into fuel marketing in Fiji and Africa but none of the deals materialised.

India has a tiny presence in the overseas downstream sector. However, ONGC has acquired a number of foreign oil and gas exploration and production assets through its overseas investment arm — ONGC Videsh Ltd.

In the fiscal year to March ONGC made a net profit of 17.90 billion rupees ($277.8 million) compared to 6.2 billion rupees for HPCL.

HPCL controls about 11 percent of India’s overall 4.7 million barrels per day (bpd) refining capacity, far lower than its retail sales.

“We have a plate bigger than what we can chew, we are buying from other refiners,” Surana added.

Last year HPCL sold about 35 million tonnes of refined products in the country through its vast retail network and had to buy about 10 million tonnes from other refiners including MRPL to meet the demand, he said.

“Standalone refinery does not make sense as their profits are determined by gross refining margins, inventory gain or losses…and the company is deprived of stable marketing margins,” Surana added.

“It will unlock the value for MRPL shareholders as well”.

HPCL currently has a stake of about 17 percent stake in MRPL.

The merger of MRPL and HPCL will depend on approval by the boards of the two companies. No timeline has been fixed for integration of the two companies, he added.

The government has not yet decided at what price its will sell HPCL’s shares to ONGC. Surana feels that share price of his firm do not reflect the true ‘intrinsic value’ and should not be sold at a discount to market price.